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Woods v. K.R. Komarek, Inc.

United States District Court, D. Minnesota

May 26, 2017

Bobby J. Woods, Plaintiff,
v.
K.R. Komarek, Inc., and Brady-McCasland, Inc., Defendants.

          Kevin S. Sandstrom, Esq., counsel for plaintiff.

          Calvin P. Hoffman, Esq. and Stinson Leonard Street, LLP, counsel for defendant K.R. Komarek, Inc.

          Stephen M. Harris, Esq. and Meyer & Njus, counsel for defendant Brady-McCasland, Inc.

          ORDER

          David S. Doty, Judge United States District Court

         This matter is before the court upon the motions for summary judgment by defendant K.R. Komarek, Inc. and plaintiff Bobby J. Woods d/b/a Controls Plus. Based on a review of the file, record, and proceedings herein, and for the following reasons, the court grants Komarek's motion and grants Woods's motion in part.

         BACKGROUND

         This commercial dispute arises out of Woods's purchase of industrial equipment from Komarek on behalf of defendant Brady-McCasland, Inc. (BMI). Woods is an engineer who specializes in industrial instrumentation and controls. Woods Dep. At 7:22-9:23. Woods previously worked at Hosokawa Bepex where he helped BMI design a control system for its facility.[1] Id. at 10:2-10; 11:8-16. While working on the BMI project, Woods met BMI's plant manager, Alan Johnson. Id. at 26:13-27:3. Woods later formed Controls Plus, a company that provides consulting and design services. Id. at 15:14-16:13. In 2000 or 2001, Johnson asked Woods to help him locate a new source of manufacturing equipment. Id. at 30:1-20. Woods recommended Komareck, a manufacturer of custom briquetting and compacting equipment. Id. From 2003 through 2014, Johnson ordered equipment for BMI from Komarek and other manufacturers through Woods. Id. at 30:21-32:16. Johnson would place an order with Woods, who would then order the equipment from Komarek or another manufacturer for delivery to BMI. Id. at 35:9-37:9. BMI did not pay the manufacturer directly. Instead, BMI paid Woods, and Woods paid the manufacturer. See, e.g., ECF No. 4 Ex. B; Sandstrom Aff. Ex. 6, at 1-2. Although the equipment was sent directly to BMI, BMI claims that Woods represented that he would store the equipment.

         Beginning in 2005 or 2006, Woods started giving Johnson cash incentive payments. Id. at 139:2-12. Under this arrangement, Johnson would request a quote from Woods, who would then contact a manufacturer to obtain a price. Id. at 47:15-48:18. Woods testified that he would decide how much to charge BMI solely based on the quoted price. Id. But he also testified that his prices reflected the value he added to the transaction such as ensuring that the ordered parts met BMI's specification. Id. at 55:1-20. Johnson, who needed approval for the purchases, told Richard Fox, BMI's owner, that the quoted prices were a “good price, a fair price, and a fair deal for the company.”[2] Fox Dep. II at 16:23-17:2. Fox routinely approved the orders. Fox Dep. I at 30:3-4. Woods would then pay Johnson 10 to 20 percent of the profits from each order. Woods Dep. at 114:1-8. From 2011 through 2015, Woods paid Johnson over $132, 833. See Harris Aff. Ex. C, ECF No. 27.[3]Fox was not aware of the arrangement between Woods and Johnson. Woods Dep. at 167:10-12.

         Three specific orders are at issue in this case. First, in January 2014, Woods ordered $32, 170 worth of equipment from Komarek to be delivered to BMI (First Order). ECF No. 4 ¶ 6; Id. Ex. A.; ECF No. 12 ¶ 3. It is undisputed that Woods made an initial payment of $9, 291 but failed to pay the balance of $22, 879 after Komarek shipped the goods to BMI.[4] See ECF No. 12 ¶¶ 4-5.

         Second, in August 2014, Johnson requested a quote from Woods for industrial equipment (Second Order). See ECF No. 4 ¶ 10; id. Ex. B; ECF No. 12 ¶ 6. Woods contacted Komarek who offered the equipment at a price of $278, 550 with a thirty percent down-payment, a thirty percent mid-way payment, and the balance due within thirty days after shipment. See ECF No. 4 Ex. B; Compl. ¶ 11. Woods quoted BMI a price of $389, 970, a forty percent markup, on the same payment terms. See Sandstrom Aff. Ex. 6, at 1-2. It is undisputed that BMI accepted the quote and made the initial thirty percent and mid-way payments to Woods but failed to pay the remaining balance of $155, 988. See id. at 3; Fox Dep. I at 24:16-25:16. The parties also agree that Woods paid Komarek the initial thirty percent payment and the mid-way payment but failed to pay his remaining balance of $111, 420. See ECF No. 4 ¶¶ 12-14; id. Ex. C; ECF No. 12 ¶¶ 7-9.

         Third, Johnson placed a separate equipment order with Woods in August 2014 for the quoted price of $75, 960 (Cancelled Order). Compl. ¶ 25; BMI Second Am. Ans. ¶ 23; Harris Aff. Ex. F. BMI paid Woods in full before receiving the equipment with the understanding that Woods would order the equipment and then store it for BMI. Compl. ¶ 25; BMI Am. Ans. ¶ 25; Fox Dep. I 15:17-25; Harris Aff. Ex. F. Sometime after this order, Alan Johnson retired from BMI and was replaced by Chris Pierce.[5]

         On June 3, 2015, Pierce contacted Komarek about the Cancelled Order and discovered that Woods had never placed an order for the equipment. See Harris Aff. Exs D, E. BMI also learned that Woods did not actually store the equipment despite his representations to the contrary. See Harris Aff. Ex. F; Fox Dep. I at 13:18-14:9. In his conversations with Komarek, Pierce also learned that BMI could buy equipment directly from Komarek at a cheaper price.[6] Fox. Dep. I at 10:8-12:8; Kelly Decl. Ex. 7 at 6-7. On the same day, BMI canceled its order with Woods, and it also advised him that it would no longer place orders with him because he charged a significantly higher price and misrepresented his involvement in ordering and storing equipment for BMI.[7] Fox Dep. I at Fox Dep. I at 10:8-19, 12:16-13:22; Woods Dep. at 62:5-11. Woods did not refund any part of the $75, 960 to BMI. Woods Dep. at 160:20-161:3.

         On October 21, 2015, Woods filed suit in state court asserting claims of breach of contract, unjust enrichment, account stated, and wrongful repudiation of contract against BMI and declaratory judgment, tortious interference with prospective economic advantage, and tortious interference with contract against Komarek. On November 18, defendants timely removed, and Komarek filed an answer asserting counterclaims of breach of contract, unjust enrichment/quantum meruit, and account stated against Woods. On November 24, BMI filed an amended answer asserting counterclaims of misrepresentation/fraud, breach of contract, and breach of the covenant of good faith and fair dealing against Woods. Komarek now moves for summary judgment on Woods's claims and its counterclaim. Woods also moves for summary judgment on its breach of contract and account stated claims and BMI's counterclaims.[8]

         DISCUSSION

         I. Standard of Review

         “The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A fact is material only when its resolution affects the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute is genuine if the evidence is such that it could cause a reasonable jury to return a verdict for either party. See id. at 252 (“The mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient ....”).

         On a motion for summary judgment, the court views all evidence and inferences in a light most favorable to the nonmoving party. Id. at 255. The nonmoving party, however, may not rest upon mere denials or allegations in the pleadings but must set forth specific facts sufficient to raise a genuine issue for trial. Celotex, 477 U.S. at 324. A party asserting that a genuine dispute exists - or cannot exist - about a material fact must cite “particular parts of materials in the record.” Fed.R.Civ.P. 56(c)(1)(A). If a plaintiff cannot support each essential element of a claim, the court must grant summary judgment because a complete failure of proof regarding an essential element necessarily renders all other facts immaterial. Celotex, 477 U.S. at 322-23.

         II. Breach of Contract and Account Stated Against BMI

         Woods argues that summary judgment should be granted on his breach of contract claim, or alternatively, his accounted stated claim, because it is undisputed that BMI has failed to pay him the balance of $155, 988 on the Second Order without justification. BMI responds that there are genuine issues of material fact as to its affirmative defenses of fraudulent misrepresentation and equitable estoppel, which preclude summary judgment.[9]

         A. Fraudulent Misrepresentation

         Fraudulent misrepresentation is an affirmative defense to a breach of contract claim where the party ...


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